African Bank has published its financial results for the year ended September 2021 showing a net profit of R534 million, compared to a prior loss of R27 million.
The return to profitability for the group was largely attributable to upfront higher credit impairments raised a year ago being sufficient to account for the increased risk of default, strong collections and increased profits in the insurance entity.
“The financial year has been a story of two halves at African Bank, with the first six months being about business resilience as we emerged from harsh effects of the first three waves of Covid-19. The second half of the financial year was about transitioning the business to our new 2025 Excelerate strategy, while instituting necessary risk aversion measures ahead of a fourth wave of Covid-19, which is now unfolding,” said CEO, Kennedy Bungane.
Key aspects of the African Bank results include the following:
- Return on equity 4.9% (FY 2020: negative 0.3%);
- Gross loan advances decreased by 6% to R26.72 billion;
- Net customer advances balances decreased by 4% to R16.46 billion;
- Credit loss ratio improved to 4.9% (FY 2020: 11.7%);
- Retail deposits represent 61% of total funding of the bank (FY 2020: 35%).
The transactional product MyWORLD, which was launched in 2019, continues to gain traction and broader consumer appeal, with an increase of customer accounts, opened increasing to 741,000 from 388,000 a year ago. Transactional volumes have climbed to 17.3 million compared to 7.3 million transactions in 2020 processed, representing a value of R24.5 billion. from R8.7 billion before.
Retail deposits book grew by 73% to R10.315 billion, which constitutes 61% of total funding. Some 59% of retail deposits are invested into the 60-months fixed term product, African Bank said. The number of retail savings and investment accounts grew by 40% from 60,000 in the prior year to 83,928 as at the end of September 2021.
During the year under review, the bank’s board signed off on a new 2025 strategy, which includes a two-pronged approach to expand the core growth initiatives such as providing a digital offering to small, medium and micro enterprises, to grow the customer base and diversify the product offering while strengthening digital interventions and capabilities.
The new strategy is developed on the foundation of five sustainability levers: customer satisfaction, social responsibility, financial resilience, inclusivity and environmental promotion.
Looking ahead, Bungane, said: “As the vaccine rollout continues to progress in South Africa and around the world, and despite subsequent waves of the pandemic, and indeed last weeks’ news on the new Omnicron variant of Covid, we are confident that opportunities will exist for African Bank and for our customers.
“During this period of uncertainty, it has become clear to us that our strategy and operating model must remain adaptive and nimble, particularly in relation to the needs of our customer base, our product and service offering and our capacity to manage future disruption risks to our people, processes and services. These ongoing adaptions will assist to cement a future-fit organisation.”